ASYMMETRY® Observations are Mike Shell’s observations of all things asymmetry, asymmetric risk/reward, asymmetric payoffs, and asymmetric investment returns.
The Math Behind Asymmetric Investing: A 50% portfolio loss requires 100% gains just to break even. A 30% loss needs 43% to recover. For investors living off their portfolio after selling a business or medical practice, this asymmetric math changes everything. Here's why drawdown control matters more than maximizing returns.
The Art of Asymmetric Investing: When Imbalance Beats Balance. Most investors think the goal is balance. Balanced portfolios. Balanced risk. Balanced returns. What business owner wants to balance their profit and loss? What investor wants to balance their risk and reward?
Structural change can be obvious in the data and still fail to deliver asymmetric returns. Retail sales clearly migrated online, yet the equity trades tied to that shift stopped compounding once the market fully priced it. This observation explains why being right on fundamentals isn’t enough — true asymmetry exists only before consensus forms.
The Geometry of Asymmetry explains why superior outcomes don’t come from prediction, conviction, or complexity—but from structure. Markets aren’t linear. Gains and losses compound differently, risk is asymmetric, and a single large drawdown can overwhelm years of progress. By defining downside first and leaving upside open, investors create a geometric advantage that survives uncertainty, regime shifts, and inevitable mistakes. Asymmetry isn’t an opinion—it’s math applied to real-world markets.
Markets don’t move in isolation. They interact. Equities, rates, volatility, options, and liquidity form a system where pressure in one area transmits into others. Understanding those interactions—who is forced to act, when risk accelerates, and where fragility builds—matters far more than predicting the next market move. Connecting the dots isn’t about forecasting outcomes. It’s about understanding how risk flows through the system—and structuring portfolios so downside is defined while upside remains open.
Many strategies look asymmetric—until volatility exposes what was hidden. True asymmetry starts with defined risk and leaves upside open. The difference is geometry, not storytelling.
A strategy can look disciplined, consistent, and “low risk” right up until the moment it isn’t. The Captain Condor $50 million collapse wasn’t caused by a market crash or bad luck — it was caused by a hidden asymmetry in the risk itself. This observation explains how smooth returns, high win rates, and “defined risk” trades can still produce catastrophic outcomes when portfolio risk is left undefined — and why true asymmetry always starts with survival, not consistency.
Most investment strategies look attractive until you price the cost of not blowing up. Nassim Nicholas Taleb explains why “alpha” built on averages often disappears once real-world survival, drawdowns, and irreversible loss are properly accounted for—an insight that matters deeply for business owners selling their company and transitioning from wealth creation to wealth preservation.
Most portfolios are built on averages and optimization. But markets don’t move on averages—and investors don’t live through drawdowns like a spreadsheet assumes. Under pressure, loss aversion changes decisions in predictable ways: winners get cut too early, losers get held too long, and volatility clusters. The real risk isn’t just market risk. It’s behavioral risk. That’s why we design systematic risk management that defines downside in advance and lets upside trends compound.